DoD's $194M engine sustainment contract awarded to Rolls-Royce Corporation raises value concerns

Contract Overview

Contract Amount: $194,823,114 ($194.8M)

Contractor: Rolls-Royce Corporation

Awarding Agency: Department of Defense

Start Date: 2023-12-01

End Date: 2024-11-30

Contract Duration: 365 days

Daily Burn Rate: $533.8K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: T108 ENGINE, NACELLE, AND PROPELLER SUSTAINMENT. PRICE PER FLYING HOUR.

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46225

State: Indiana Government Spending

Plain-Language Summary

Department of Defense obligated $194.8 million to ROLLS-ROYCE CORPORATION for work described as: T108 ENGINE, NACELLE, AND PROPELLER SUSTAINMENT. PRICE PER FLYING HOUR. Key points: 1. The contract's high value suggests a significant investment in critical aircraft engine sustainment. 2. Sole-source award limits price discovery and potentially increases costs for the government. 3. Lack of competition is a key risk indicator for potential overspending. 4. The firm-fixed-price contract type offers some cost certainty but doesn't mitigate the lack of competition. 5. Performance is tied to engine sustainment, crucial for maintaining operational readiness. 6. The contract falls within the aircraft engine manufacturing sector, dominated by a few key players.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific focus on engine sustainment. Without competitive bids, it's difficult to ascertain if the $194 million price tag represents fair market value. The price per flying hour, while not explicitly stated as a benchmark, is a critical metric for assessing long-term cost-effectiveness. Further analysis would require comparing this to historical sustainment costs for similar engine types or to industry benchmarks for engine maintenance and repair services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Rolls-Royce Corporation, was considered. This approach bypasses the standard competitive bidding process, which typically involves multiple companies submitting proposals. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they inherently limit price negotiation and can lead to higher costs for the government as there is no direct comparison to other market offerings.

Taxpayer Impact: The lack of competition means taxpayers may not be receiving the best possible price for these critical engine sustainment services. Without competing bids, there is less pressure on the contractor to offer cost savings, potentially leading to a higher overall expenditure of taxpayer funds.

Public Impact

The Department of Defense (DoD) is the primary beneficiary, ensuring the operational readiness of its aircraft fleet. Services delivered include sustainment of T108 engines, nacelles, and propellers, vital for aircraft functionality. The geographic impact is likely nationwide, supporting various military installations that operate aircraft utilizing these engines. Workforce implications include continued employment for skilled technicians and engineers at Rolls-Royce Corporation and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Lack of transparency in the procurement process due to no-bid award.
Potential for cost overruns if market prices fluctuate and are not renegotiated.

Positive Signals

Rolls-Royce Corporation is a known entity with established expertise in aircraft engine manufacturing and sustainment.
Firm-fixed-price contract provides a degree of cost predictability for the government.
Focus on sustainment ensures continued operational capability for critical DoD assets.

Sector Analysis

The aircraft engine manufacturing and repair sector is highly specialized, with a limited number of global players capable of producing and sustaining complex jet engines. Rolls-Royce Corporation is a significant entity within this market. Contracts for engine sustainment are crucial for maintaining the operational readiness of military aviation fleets and represent a substantial portion of defense spending in this sector. Benchmarking against other similar sustainment contracts within the DoD or allied nations would be necessary for a comprehensive value assessment.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Therefore, the primary contractor, Rolls-Royce Corporation, will likely perform the majority of the work. There is no explicit information regarding subcontracting plans to small businesses. Without specific set-aside goals or reporting requirements for subcontracting, the direct impact on the small business ecosystem for this particular contract is likely minimal, though Rolls-Royce may engage small businesses as part of its broader supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The firm-fixed-price nature of the contract provides some level of accountability for cost, but performance metrics related to engine availability and reliability would be key. Transparency is limited due to the sole-source award, making it harder for the public to scrutinize the value. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Engine Manufacturing
Aircraft Parts Manufacturing
Defense Logistics and Sustainment
Aerospace Industry

Risk Flags

Sole-source award
Lack of competition
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $194.8 million to ROLLS-ROYCE CORPORATION. T108 ENGINE, NACELLE, AND PROPELLER SUSTAINMENT. PRICE PER FLYING HOUR.

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $194.8 million.

What is the period of performance?

Start: 2023-12-01. End: 2024-11-30.

What is the historical spending pattern for T108 engine sustainment with Rolls-Royce Corporation?

Detailed historical spending data for this specific T108 engine sustainment contract with Rolls-Royce Corporation is not provided in the given data. However, the current award of $194,823,113.94 for a 365-day duration suggests a significant and ongoing investment. To understand historical patterns, one would need to access previous contract awards for the same or similar services from the DoD to Rolls-Royce or other potential vendors. Analyzing trends in contract value, duration, and scope over several fiscal years would reveal whether spending has increased, decreased, or remained stable. This context is crucial for assessing if the current expenditure is an anomaly or part of a consistent budgetary allocation for engine sustainment.

How does the price per flying hour for T108 engines compare to other similar military aircraft engines?

The provided data does not explicitly state the 'price per flying hour' as a direct metric for this contract, but rather the total contract value. The 'd' field mentions 'PRICE PER FLYING HOUR' as a descriptor, implying it's a key performance indicator or pricing basis, but the actual rate is not given. To compare this to other similar military aircraft engines, one would need access to the specific per-flying-hour rates for comparable engine types across different platforms (e.g., other fighter jets, transport aircraft, helicopters) within the DoD's inventory. Such data is often found in detailed contract line item descriptions or through defense budget analysis reports. Without these comparative figures, assessing whether the T108's per-flying-hour cost is competitive or excessive remains speculative.

What are the specific performance metrics and Key Performance Indicators (KPIs) for this contract?

The provided data does not detail the specific performance metrics or Key Performance Indicators (KPIs) for this T108 engine sustainment contract. Typically, sustainment contracts for critical components like engines would include KPIs related to engine availability, Mean Time Between Failures (MTBF), Mean Time To Repair (MTTR), and adherence to scheduled maintenance. The contract's firm-fixed-price nature suggests that the contractor, Rolls-Royce Corporation, is responsible for delivering the agreed-upon sustainment services within the set budget. However, the effectiveness of the contract hinges on how well these unstated KPIs are monitored and enforced by the Defense Contract Management Agency (DCMA) to ensure the DoD receives the expected level of operational readiness and reliability for the T108 engines.

What is Rolls-Royce Corporation's track record with similar sole-source sustainment contracts within the DoD?

Rolls-Royce Corporation has a long-standing relationship with the Department of Defense and is a major provider of engines and sustainment services for various military platforms. While this specific T108 engine sustainment contract is sole-source, Rolls-Royce likely holds numerous other sustainment contracts, some of which may also be sole-source due to the proprietary nature of their engine technology and the specialized expertise required. Assessing their track record would involve reviewing past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS), any past disputes or contract modifications, and the overall history of successful delivery on similar large-scale sustainment agreements. Without access to these specific performance records, it's difficult to definitively gauge their reliability and efficiency on sole-source engagements.

Are there any alternative engine sustainment providers that could have competed for this contract?

The aircraft engine market, particularly for specific military platforms, is highly concentrated. For the T108 engine, it is probable that Rolls-Royce Corporation is the original equipment manufacturer (OEM) and holds the intellectual property rights for its design, maintenance, and repair. This often leads to sole-source situations for sustainment, as only the OEM possesses the necessary technical data, specialized tooling, and certified personnel. While other MRO (Maintenance, Repair, and Overhaul) providers might exist, they would likely require extensive licensing, technology transfer, and training from Rolls-Royce, making direct competition difficult and potentially less cost-effective than direct OEM support. Therefore, it is plausible that few, if any, viable alternative providers could have realistically competed for this specific contract without significant barriers.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Engine and Engine Parts Manufacturing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC

Address: 450 S MERIDIAN ST, INDIANAPOLIS, IN, 46225

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $194,823,114

Exercised Options: $194,823,114

Current Obligation: $194,823,114

Actual Outlays: $13,800,000

Subaward Activity

Number of Subawards: 14

Total Subaward Amount: $32,177,556

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA812423D0002

IDV Type: IDC

Timeline